Good morning traders.
Finally 1.15 got taken out yesterday and closed the day at 1.1550. Expectation is now for more upside to 1.16 and beyond should this not turn out to be a false break. I doubt it is but we always need to be mindful of the the opposite scenario. Remember the recent data from the eurozone has not been good so nothing has changed fundamentally.
There was nothing of great note from a macro perspective out yesterday suffice to say the US / China trade talks ended with a positive spin saying that the foundations have been set for resolving each others concerns. So not much real progress but some bullish comment to help markets.
We had a few Fed speakers out also yesterday all singing from the same dovish song sheet, the main note of which being that further policy on rates is firmly data dependent with no set path.
Of course we also had the usual chaotic Brexit discussions in the UK Parliament but I´m at a loss as to how to interpret any outcomes apart from the fact that there remains great uncertainty. Situation as normal more or less with a no deal exit slightly less likely as Parliament won a couple of votes giving them power over the Government to decide whether or not the UK leaves with a no deal.
Data for today is a little thin but we have already had Chinese CPI and PPI data out overnight both of which missed on expectations. There is always a doubt that China data can be relied upon to be accurate but with both missing forecasts, whichever way you look at it, it is further evidence of a slowing economy. Many analysts are focused on China right now as it could be the bell weather for any darker recessionary clouds that might be building on the horizon.
So what can we expect for today.
From the D1 perspective it does look like we are setting up for a test higher now we have at last broken the upside of the range with a daily close. One swallow does not make a summer but the odds are for further moves north of the chart.
My longer term view (next few weeks) if we do stay above the range highs, is for a move up to 1.1720s. The reason for this is clear on the chart. I´ve marked out a range from about 1.1650 to 1.1725 that is colored in grey with a yellow bar noting the range that has not yet been tested with price action.
I consider this to be a void or gap of sorts which is likely to get filled in at some point. Just as nature abhors a vacuum so it is with price charts. While it obviously happens, it is unusual for an area not be be retested or filled in with price discovery and this void remains untouched since it formed back in October last year. Timing is the issue (when is it not?) but I will be looking for price to move up here into this area if the move has legs. I think if we stay above 1.15 (or 1.1450) this could be a target for a swing trade.
From the hourly perspective it is quite difficult to have much strong conviction with levels today, particularly R levels. Nevertheless I´ve noted the levels that look to be potentially reactive up and down. Given that we have moved into a significantly new area of the chart there is not much short term structure to trade off on the left hand side so plotting good levels on the upside is more difficult than marking up levels to the downside.
My working plan for today is to buy dips so any moves back to S1 and certainly any move back to 1.15 should in the first instance be bought on the basis that we are long until we are not. Any moves up from the kick off today will help to form some structure in the short term charts to help set any levels to work with. Consequently while I´ve noted R levels I will be more interested in how price action forms on the ltf charts and they may be more useful as support dependent on how we go today. If its unclear to you I suggest you stand aside and let the chart unfold today.
Have a good day amigos :).